EUR/USD Bearish Breakout Starts ABC Zigzag Pattern Towards 1.1875

The EUR/USD broke the support trend line (dotted green) after completing 5 strong bullish waves.The old uptrend has been replaced by a new downtrend.

This article analyses what to expect from the price and wave patterns. We also review key targets and decision zones.

Price Charts and Technical Analysis

The EUR/USD seems to have completed 5 waves (grey) of wave 5 waves (pink). This price swing is probably a wave A (purple) of a larger ABC (purple) zigzag correction. The ABC could fit within a wave B (red) of a larger ABC (red) pattern:

1. If price action is going to move lower in wave B (purple), then it will likely create an ABC (pink) pattern downwards.
2. Usually speaking, the wave A (pink) of a zigzag finishes at the 38.2% Fib and 144 ema close.
3. A 3 wave bounce (green arrows) from the support could confirm a wave B (pink).
4. A bearish reaction (orange arrow) at the resistance zone could confirm a wave C (pink).
5. The main target of the wave C is the 61.8% Fibonacci level. This is where the wave B (purple) could end and the wave C (purple) could start (blue arrow).
6. A break below the bottom invalidates this wave outlook. A break above the top places it on hold and could indicate an uptrend or a different type of correction in wave B (purple) – for instance not a zigzag but a ABC flat.

On the 1 hour chart, price action has broken below the support trend lines (dotted green) and the 144 ema, which is indicating a shift from an uptrend to a downtrend:

1. The bearish bounce at the 50% Fibonacci level seems to complete a bullish ABC (orange) pattern in wave 4 (grey).
2. A lower low could confirm the wave 5 (grey) in wave A (pink) at the Wizz 5 and -27.2% Fib target.
3. A bullish bounce (green arrows) could indicate the wave B (pink).
4. A break above the resistance trend line (orange) and the 144 ema could indicate that the wave 4 and 5 (grey) of A (pink) has already been completed. Price could move up to the Fibonacci levels.
5. Only a deep push up invalidates this temporary bearish wave analysis.

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

For a look at all of today’s economic events, check out our economic calendar.